Bank Of Canada Maintains Bond Purchases At $3 Billion A Week

The Bank of Canada has announced that it will continue to buy $3 billion a week of Canadian government bonds, while reiterating that the pace of asset purchases will decline as the recovery proceeds.

At its latest policy meeting, the central bank held its benchmark interest rate at 0.25% and again pledged not to raise interest rates until damage done to the Canadian economy from the COVID-19 pandemic is fully repaired.

Analysts anticipate the Bank of Canada will gradually taper bond purchases. The central bank was among the first among advanced economies to shift to a less expansionary policy in April, when it accelerated the timetable for a possible interest-rate increase and pared back its bond purchases.

Another taper in bond purchases is expected when the Bank of Canada holds its next policy meeting on July 14.

In a written statement, the central bank said it is continuing asset purchases to "keep interest rates low across the yield curve… Decisions regarding adjustments to the pace of net bond purchases will be guided by our Governing Council’s ongoing assessment of the strength and durability of the recovery."

The Bank of Canada has said it will bring its net purchases of bonds to zero before it starts to consider raising its policy rate, with swaps trading suggesting that investors are pricing in a 70% chance of an interest rate hike over the next 12 months.

Nothing in the Bank of Canada’s statement suggests that the central bank is pushing back against further gains in the Canadian dollar, even as it acknowledged the currency has climbed along with commodity prices.

Canada’s dollar has risen 5.5% against the U.S. dollar year-to-date.